Financial Regulatory Reform Bill
On Monday, the Senate resumed its consideration of S. 3217 the Restoring American Financial Stability Act of 2010. The Senate rejected an amendment sponsored by Sen. Mike Crapo (R-ID) which would have limited further bailouts of Fannie Mae and Freddie Mac and passed an amendment sponsored by Sen. John Cornyn (R-TX) that protects United States taxpayers from paying for the bailouts of foreign governments. On Tuesday, the Senate adopted an amendment sponsored by Sen. Tom Carper (D-DE) that limits the powers of state attorneys general to enforce consumer financial regulations, permits state attorneys general to enforce consumer regulations against any state-licensed or chartered bank but limits their powers to enforce regulations on national banks that are prescribed by the new consumer protection office, and removes a requirement that the federal government, prior to preempting states, must find an applicable substantive standard. The Senate rejected an amendment sponsored by Sen. Byron Dorgan (D-ND) that would have banned naked credit default swaps but passed an amendment sponsored by Sens. Charles Grassley (R-IA) and Claire McCaskill (D-MO) that prevents inspectors general at five financial regulatory agencies, namely the Federal Reserve Board of Governors, the Commodity Futures Trading Commission, the National Credit Union Administration, the Securities and Exchange Commission, and the Pension Benefit Guaranty Corporation, from becoming presidential appointments. On Wednesday, the Senate rejected a cloture motion sponsored by Senate Majority Leader Harry Reid (D-NV) to end debate on the bill and also rejected an amendment sponsored by Sen. Sheldon Whitehouse (D-RI) that would have forced lenders to abide by state-mandated caps on interest rates. Current federal regulations allow credit card companies to follow interest rate caps of the states in which they are located, rather than those prescribed by their customers’ home states. On Thursday, the Senate reconsidered and passed a cloture motion sponsored by Senate Majority Leader Harry Reid (D-NV) to end debate on the bill before passing the bill itself by a vote of 59-39.
The bill now proceeds to a House-Senate conference where the two bodies will iron out the substantial differences between their two bills. The key issues on which the House and Senate bills deviate are the new consumer financial protection agency, the regulation of auto dealers, over-the-counter derivatives, and the “Volcker Rule.” Regarding a new Consumer Financial Protection Agency, the Senate bill would move a proposed consumer protection agency into the Federal Reserve and the House bill would create it as a stand-alone agency with more leeway to implement regulations. House Speaker Nancy Pelosi (D-CA) and House Financial Services Committee Chairman Barney Frank (D-MA) have both voiced their strong support for keeping the House-passed language in the final version of the bill.
